What is Statement Affairs? – Definition

However, while calculating profit or loss under this method, the following things may also be kept under consideration:

Fresh Capital or Additional Capital

If fresh or Additional Capital is being introduced during the period it will make the closing capital incorrect. To calculate the true amount of profit or loss, the fresh capital should be deducted from the closing capital.

Drawings

If some goods or amount is withdrawn for personal use by owner during the period, then these drawings reduce the amount of closing capital. So it is necessary that the amount of drawings should be added to closing capital to give the true profit.